Today's Novell Deal Helps Microsoft Continue Linux Fight (NOVL, MSFT)

Matt Rosoff, provided by

Published 4:00 am, Monday, November 22, 2010

Software industry veteran Novell has found a buyer: privately held Attachmate is picking up the company for $2.2 billion. But more interestingly, a holding company led by Microsoft is paying Novell a separate $450 million cash payment for the rights to more than 800 patents.

The deal helps Microsoft in its decade-long fight against open-source operating system Linux in two ways.

First, it keeps a Microsoft competitor from buying Novell's SUSE Linux implementation. VMWare was looking at buying SUSE so it could sell a top-to-bottom software stack that would compete directly against Microsoft's Windows Server and its built-in virtualization technology. This was a major fear in Microsoft's server group, according to my sources there.

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Second, although the companies didn't say exactly what patents were included, it seems likely that some of them are related to SUSE Linux. If so, these patents will give Microsoft further ammunition to sign cross-licensing deals with companies that sell other products based on Linux. And those licensing deals will continue to raise questions in the mind of potential Linux customers.

To understand why, you have to look at what Microsoft has been doing with Linux licensing deals over the past half decade or so.

In 2006, Microsoft signed a business arrangement with Novell under which it would agree not to sue SUSE customers for intellectual property (IP) violations, and would redistribute some SUSE licenses with own software. The deal raised howls among some in the open source community, which accused Novell of selling rights that it didn't own. Basically, their argument was that Microsoft was using unfounded threats to try and poison opinion against Linux; by signing the deal with Microsoft, Novell lent credence to Microsoft's claims. The spat got heated enough that Novell's CEO was forced to respond in an open letter.

Since then, Microsoft has signed many more IP-licensing deals with companies that use Linux or implement Linux in their products, from server software to cellphones. Some of these deals, like with GPS system maker Tom-Tom and cloud computing leader Salesforce.com, were only reached after litigation. When announcing many of those deals, Microsoft asserts its claims that Linux includes Microsoft IP--an assertion that's never been tested in court.

The deals are like a continuous drumbeat out of Redmond that raises fear and uncertainty in the mind of potential Linux customers. When a company like Salesforce decides to use Linux, the cost equation includes the fact that Linux is free and doesn't contain licensing encumbrances that are hard to track. But if Linux adoptees end up having to pay Microsoft a licensing fee, the cost equation doesn't look so good. Mind you, companies could fight Microsoft's assertion, but few have the resources. It's easier just to sign.

We'll see more of these deals in the future, but today's was a big step forward for Microsoft's Linux-compete strategy.